Bonn to Raise Taxes to Pay for Unification, Official Says

By FERDINAND PROTZMAN, Special to The New York Times

Published: February 22, 1991

BONN, Feb. 21—
The German Finance Minister, Theo Waigel, acknowledged today that tax increases were being planned to help pay the rising costs of unification. But he rejected contentions by critics that the Government's policies had helped push eastern Germany toward economic collapse.

Mr. Waigel's remarks on taxes confirmed what most Germans had long feared. After repeatedly promising not to finance unity through higher taxes, Chancellor Helmut Kohl first broached the subject on Jan. 23, but said increases were needed to help finance Bonn's contribution to the allied forces in the Persian Gulf.

The steady deterioration of eastern Germany's economy, however, has made Mr. Kohl's contention increasingly hollow. Critics have used it to highlight the Government's seeming unwillingness to tackle the problems of unification directly.

A growing number of critics have said that Mr. Kohl, who deftly guided the nation to unity on Oct. 3, has been caught off-guard by the scope of eastern Germany's economic miseries and is groping for ways to slow a decline that has left nearly 40 percent of the region's labor force out of work.

Mr. Waigel denied any misjudgment of eastern Germany's economic problems. But in presenting a 1991 budget proposal of $270 billion to Parliament today, he said the Government needed to raise taxes to finance its war contribution, support Eastern European nations and meet unexpected costs in eastern Germany. To Take Effect in July

Tax increases would probably take effect on July 1, Mr. Waigel said, without specifying which taxes would be raised or by how much. With the increases, the total Federal, state and local government budget deficit should be about the $93 billion that Bonn has projected for the year. Most private economists think it will be at least $104 billion. They also predict that rebuilding eastern Germany will cost more than $1 trillion over the next decade.

The issue is putting strain on Mr. Kohl's conservative coalition Government, which will begin debating tax-rise plans tonight and hopes to come up with specifics by next week.

Some officials are openly advocating a short-term increase in personal income taxes. But Government officials said the Finance Ministry had presented a plan to raise the tax on gasoline, diesel and heating oil by at least 13 cents a liter. Taxes on gas and diesel fuel range from 29 to 45 cents a liter.

Although the spotlight is on taxes, the overriding issue remains Bonn's handling of the economic crisis in eastern Germany. The Government had hoped to finance unification through extensive borrowing and spending cuts. It was also banking on a land rush of private investment in the region, which has yet to happen. Disagreements Grow Public

That has resulted in public disputes between Mr. Kohl's Christian Democratic Union party and its Bavarian sister party, the Christian Social Union, as well as the Free Democratic Party, the junior partner.

The discord was evident today when the Economics Minister, Jurgen Mollemann, a Free Democrat, appeared to contradict Mr. Waigel's contention that the Government had not misjudged eastern Germany's economic problems.

"We overestimated the willingness of investors in Germany and Europe, perhaps also in the United States and Japan, to invest in eastern Germany," Mr. Mollemann said. "We did not believe that the mental structures left by 58 years of totalitarian thinking would take so long to overcome."